Wills & Estates: the difference of a “gift” & a “loan” between parents, their children, & property purchases.

A promissory note can prove vital to protect a parent's assistance to their child or children!

In the heart-wrenching legal case of Yang v. Hart, 2024 BCSC 1547, a family's grief over the loss of their daughter, a young RCMP officer, erupted into a fierce courtroom battle over $300,000. The officer’s parents, who had provided the funds to help her purchase her first home, claimed it was a loan. But her spouse insisted it was a gift, a crucial distinction that would determine whether the widow or the parents would keep the money.

The case took a decisive turn when a promissory note, signed by all parties, surfaced, confirming the money was indeed a loan. With this evidence, the court ruled in favor of the grieving parents, allowing them to reclaim the $300,000:

[30]      The next question to be determined by this Court is whether Ms. Hart is bound to the obligations in the note.

[31]      As discussed above, Ms. Hart testified that she and Ms. Yang wanted the POAs for use if one of them were incapacitated. She testified that she never authorized Ms. Yang to sign a promissory note on her behalf, and she had no expectation that either of them would use the POAs while the other was still capable of managing her own affairs. 

[32]      Further, Ms. Hart submits that Mr. Yang was not advised by Ms. Yang that she had exercised her powers under the POA when signing the promissory note.

[33]      These factual assertions give rise to legal issues which are governed by the Bills of Exchange Act, R.S.C. 1985, c. B-4 [BEA], and the Power of Attorney Act, R.S.B.C. 1996, c. 370 [PAA].

[34]      Section 4 of the BEA states:

[4] Where, by this Act, any instrument or writing is required to be signed by any person, it is not necessary that he should sign it with his own hand, but it is sufficient if his signature is written thereon by some other person by or under his authority.

[35]      In my view, this provision is not of particular assistance to either party. It requires Ms. Hart’s signature to have been affixed to the document by Ms. Yang under Ms. Hart’s authority. As Mr. Yang argues that this authority was granted under the POA, the issue remains: whether Ms. Yang was authorized to affix Ms. Hart’s signature to the document under the terms of the POA. 

[36]      Ms. Hart relies on a 1927 decision of the Saskatchewan Court of Appeal in Bank of Toronto v. Matheson, [1927] 4 D.L.R. 328, 1927 CanLII 174 (SKCA) for the proposition that powers of attorney must be read strictly. In this case, however, the POA is general and broadly worded. It appointed Ms. Yang to be Ms. Hart’s attorney in accordance with the PAA, “to make decisions on my behalf and to do anything that I may lawfully do by an agent.” 

[37]      Paragraph 7 of the POA states:

The Attorney and Alternate Attorney authority may be exercised while I am capable of making decisions about my financial and legal affairs and will continue if I become incapable of making decisions about my financial and legal affairs.

[38]      Further, paragraph 9 states:

This Enduring Power of Attorney is not subject to any conditions or restrictions. 

[39]      Further, Ms. Hart relies on s. 20 of the PAA which states in part as follows:

20 (1) An attorney may make a gift or loan, or charitable gift, from the adult's property if the enduring power of attorney permits the attorney to do so or if

(a) the adult will have sufficient property remaining to meet the personal care and health care needs of the adult and the adult's dependants, and to satisfy the adult's other legal obligations, if any,

(b) the adult, when capable, made gifts or loans, or charitable gifts, of that nature, and

(c) the total value of all gifts, loans and charitable gifts in a year is equal to or less than a prescribed value.

(2) An attorney may receive a gift or loan under subsection (1) if the enduring power of attorney permits.

(3) Permissions under subsections (1) and (2)

(a) must be express, and

(b) may be in relation to a specific gift or loan, or charitable gift, or to gifts or loans, or charitable gifts, generally.

…

[40]      The PAA refers to the person who gave the POA as the “adult” and I will use that term in these reasons. Ms. Hart submits that s. 20(3) applies to any loans made in favour of the adult and that the PAA required Ms. Yang to obtain Ms. Hart’s express permission before committing Ms. Hart to repay the funds provided by Mr. Yang. 

[41]      In response, Mr. Yang argues that s. 20 concerns funds lent or gifted from the adult’s property. He submits that subsection (1) applies to loans or gifts to anyone from the adult’s property, and subsection (2) applies specifically to funds lent or gifted to the attorney by the adult. In my view, his interpretation must be correct. I reach that conclusion primarily based on the words of the section: subsection (1) refers to a gift or loan, or charitable gift, from the adult's property, and subsection (2) refers to a gift or loan received by the attorney under subsection (1). 

[42]      In Derreth (Re), 2024 BCSC 1033, Justice Gomery discussed s. 20 of the PAA. The facts of the case before him were distinguishable from those in this case, but his general pronouncements regarding the meaning and application of s. 20 are helpful. At para 13, he held:

[13] The intention is clear. The sections are concerned with gratuitous transfers – gifts or loans – from the property of an adult person under disability. They establish that such transfers are permissible, but only in specified circumstances.

…

[15] Subsection 20(2) deals with the special case of a gratuitous transfer (a gift or loan) to the attorney. Such a transfer is only permitted if the enduring power of attorney expressly permits. 

[Emphasis added]

[43]      Mr. Yang’s interpretation of this section is also consistent with the purpose of s. 20 which, in my view, is to protect the adult against attorneys who abuse their powers. The making of loans or gifts from the adult’s property to third parties clearly may be prejudicial to the adult. Loans or gifts from the adult’s property to an attorney may be even more so. However, Ms. Hart’s position, if accepted, would mean that an attorney would be restricted from receiving gifts made to the adult, on behalf of the adult, which would make no commercial sense. 

[44]      Finally, in support of her argument that the promissory note is not binding upon her, Ms. Hart relies on s. 19(2) and (3)(c) of the PAA. The first of these two subsections states:

19 (2) When managing and making decisions about the adult's financial affairs, an attorney must act in the adult's best interests, taking into account the adult's current wishes, known beliefs and values, and any directions to the attorney set out in the enduring power of attorney.

[45]      Further, s. 19(3)(c) provides that an attorney must “to the extent reasonable, foster the independence of the adult and encourage the adult's involvement in any decision-making that affects the adult.”

[46]      Ms. Hart argues that the promissory note was not in her best interests and therefore, if Ms. Yang signed the promissory note on Ms. Hart’s behalf, her decision to do so was contrary to s. 19(2). 

[47]      However, in my view, while Ms. Yang’s decision to sign the promissory note may have been detrimental to Ms. Hart when viewed in isolation, it is necessary to assess the entire arrangement made between Ms. Yang and her father. The promissory note was made in exchange for the funds received from Mr. Yang, which allowed Ms. Yang and Ms. Hart to buy the McKim townhouse. It was a significant benefit to Ms. Yang and Ms. Hart to have funds loaned to them by Mr. Yang without interest and without a specified repayment plan.

[48]      Relying on s. 19(3), Ms. Hart argues that Ms. Yang failed to encourage her involvement in decision-making regarding the promissory note and the loan from Mr. Yang. I note, however, that this subsection is not an unqualified prescription, as it does not unconditionally require the adult’s involvement; rather, it requires the attorney to “encourage” the adult’s involvement “to the extent reasonable.” 

[49]      In any event, regarding both of Ms. Hart’s arguments under s. 19, no law or provision of the PPA has been brought to my attention which authorizes the Court to set aside a transaction on the basis that the attorney acted in violation of that section. Ms. Hart referred to two decisions in which s. 19 was applied: Meng Estate v. Liem, 2019 BCCA 127; Virk v. Singh, 2020 BCSC 225. However, these decisions involve claims for breach of fiduciary duty or breach of trust against attorneys.   

[50]      In summary, I find that the promissory note is binding on Ms. Hart. Ms. Yang was authorized by the POA to sign the promissory note on Ms. Hart’s behalf, and, on the evidence, she must have done so. None of the arguments raised on behalf of Ms. Hart under the PPA results in the promissory note being unenforceable. 

In reaching its decision, the court also examined the law on unjust enrichment, stating:

[54]      As is well known, there are three criteria that a plaintiff must prove to establish unjust enrichment: the defendant was enriched; the plaintiff suffered a corresponding deprivation; and there was no juristic reason for the enrichment and deprivation: Kerr v. Baranow, 2011 SCC 10. 

[55]      In this case, it appears clear that Ms. Hart was enriched by the funds provided by Mr. Yang (although by precisely how much is a matter of dispute and will be addressed below) and that Mr. Yang suffered a corresponding deprivation. The primary question to be determined by this Court is whether there is a juristic reason. That question will turn on whether the funds were a gift. 

[56]      The law in relation to gifts is set out by the Court of Appeal in Beaverstock v. Beaverstock, 2011 BCCA 413. In that case, the Court held (at para 9): 

Whether the transfer was a loan or a gift depends on the actual intention of the appellant when she made the advance, which is a question of fact. As the advance was gratuitous, the onus was on the respondent to demonstrate that the appellant intended a gift, since equity presumes bargains, not gifts ... This equitable principle gives rise to a presumption the son received the money on a resulting trust, which is a rebuttable presumption of law. The trial judge was therefore required to presume the advance was not a gift and to determine whether the respondent had satisfied the burden of rebutting the presumption of resulting trust on a balance of probabilities.

[57]      Therefore, this Court must begin its analysis by presuming a resulting trust — meaning that the funds were not a gift and that the funds ought to be returned to Mr. Yang.

[58]      Further, the Court must make a finding regarding Mr. Yang’s subjective intention. I note that in this part of the analysis, although it is Mr. Yang’s position that the funds were loaned to Ms. Hart and Mr. Yang, it is not necessary to determine whether there was a loan agreement. Rather, the focus is on Mr. Yang’s actual intention. 

[59]      Unless Ms. Hart can overcome the presumption by persuading this Court that the funds were a gift, a finding of unjust enrichment will follow.